Update (1300ET): With little to no progress being made, Boris Johnson says there is a "strong possibility" that a post-Brexit trade deal with the EU probably won't happen.
"There’s now the strong possibility we will have a solution that’s much more like an Australian relationship with the EU than a Canadian relationship with the EU," BoJo said.
He added that "now is the time" for businesses and the public to prepare for that outcome, although negotiators would continue talks. He added that negotiations were "not yet there at all."
The pound tumbled on the news as the odds of a last-minute breakthrough dimmed.
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As we await the next round of last-minute talks involving Boris Johnson and European Commission head Ursula von der Leyen, markets are expressing an as-yet-unseen level of anxiety.
Looking at the GBPUSD futures curve, it looks like investors are finally pricing in near-term risk that the UK will crash out of the EU without a deal.
European Commission proposes contingency measures ensuring basic reciprocal air and road connectivity between the EU and the U.K., as well as allowing for the possibility of reciprocal fishing access by EU and U.K. vessels to each other’s waters after Dec. 31, according to statement.
Now, it looks like both Brussels and London are battening down the hatches, as the chances of a deal wane. The EU is threatening to revoke various safety certificates for products that could create serious disruptions in trade as the UK retaliates as well.
It all started weeks ago when Brussels said it might not allow reciprocity for UK financial services - trading, clearing etc. - a move that Europe hopes would help force London to return to the table.
As BoJo ventures back to the Continent for last minute negotiations, Brussels has published emergency plans to keep planes flying, trucks moving and prevent other chaos in the event that trade talks fail. HMG and Brussels have warned osignificant uncertainty" over the fate of the Brexit negotiations.
The Commission adopted the proposals on Thursday, ensuring that Britain falling over the Brexit cliff won't disrupt air travel between their normal routes between the EU and UK and that hauliers could continue to cross the English Channel after Britain leaves the single market on January 1.
"While the commission will continue to do its utmost to reach a mutually beneficial agreement with the UK, there is now significant uncertainty whether a deal will be in place on 1 January 2021,” a EU executive said in a statement.
Many feared that publishing these contingency plans could weaken the EU's negotiating position, but Brussels insisted that it was doing the bare minimum required to prevent a serious economic disruption that would weaken both the UK and the EU European citizens and businesses. The aim, it said, was to “provide a transitory solution, while negotiations on a future partnership continue, and not look to mitigate the negative impacts of Brexit in a sustained manner”.
The UK has also imposed its own "reciprocal" measures that the EU will need to accept t
These measures mostly deal with areas where there is no "international fallback solution" to prevent chaos should Britain crash out of the single-market/customs union without any kind of contingency plan in place to prevent the inevitable chaos that night ensue. For example, failure to put in place a stopgap system for road hauliers "would create unmanageable disruptions and pose a serious threat to EU interests." This could be particularly problematic as the UK scrambles to compensate for its conspicuously high death toll by getting a jump on vaccinations.